A Commodity Futures Trading Commission roundtable on prediction markets turned heated Thursday, when CME Group Chairman Terry Duffy and Kalshi co-founder Luana Lopes Lara traded insults over market manipulation and regulation at a meeting in Washington, D.C.

The confrontation unfolded as executives from traditional finance, crypto, and prediction markets debated how event contracts should be regulated. Duffy used the session to single out Kalshi, questioning whether prediction markets face the same regulatory scrutiny as established exchanges — a debate that reflects the growing pressure on regulators to decide how these products fit within existing derivatives rules and state gambling laws.

Duffy, whose CME Group operates the world's largest futures exchange by volume, said he was "a lot concerned" about prediction markets and argued that some contracts are susceptible to manipulation.

"We're not a bunch of carnival barkers at a circus," Duffy said. "We are running the most envious markets in the world in the United States of America."

Duffy singles out Kalshi

Duffy then took aim at the types of contracts Kalshi offers, mocking one market in particular.

"There's another really economic contract that has been massively important for the United States. That's a Nathan's hot dog eating contest," Duffy said sarcastically.

He also questioned why Kalshi could offer a compute prediction market while CME's proposed compute contracts remained under review.

After Kalshi was called out by name, Lara challenged Duffy on CME's own history.

"I just wanted to respond since we were called by name here," Lara said. "I would actually have to ask Terry: Has CME ever had any issues with any market manipulation, any issues ever in its history?"

"If you'd like to have a debate, I'm happy to have a debate with you," Duffy replied.

"I'm just asking a simple answer to a question," Lara said.

"I have more people in my regulatory department than you have in your whole company," Duffy said, referring to the size of CME Group's operation compared to Kalshi.

"Maybe you should learn a bit about efficiency then," Lara fired back.

"Well, maybe you should learn about credible markets," Duffy replied, before moderator Walt Lukken stepped in.

Lara then argued that the problems Duffy raised were not unique to prediction markets.

"Every market has risk and every nascent market will have risks as well, and there have been issues in every single traditional market and every single exchange here, onshore and offshore," she said. "And I think the point of having regulation is that you find these issues, you address these issues, and there's a way to address them in a correct way."

DraftKings CEO Jason Robins later urged participants to stop attacking each other's businesses.

"I would just ask everybody, both in this hearing and then also in future communications, to try to refrain from taking shots at each other's business models or decisions you may not 100% agree with," Robins said. "That doesn't advance the discussion."

Prediction markets face a regulatory fight

Prediction markets allow their users to wager on the outcome of virtually any event through futures contracts that settle for $1, with the price of the contract implying the odds of the event. For instance, on Myriad — a prediction market operated by Decrypt's parent company Dastan — the event contract for "Bitcoin highs in August" is priced at 59 cents on the $75K outcome, implying users believe there's a 59% chance Bitcoin reaches $75,000 before the end of the month.

Prediction market platforms that operate in the United States, like Polymarket and Kalshi, have become the focus of a fight between federal regulators and states over whether contracts tied to sports, elections, and other real-world events are federally regulated derivatives or gambling products subject to state law. That dispute matters because the classification determines which rules apply, who can oversee the markets, and how quickly new contracts can be listed.

CFTC Chair Selig has defended the agency's jurisdiction over federally regulated prediction markets, warning states challenging that authority in February.

"We will see you in court," Selig said in a video posted to X. The agency has since taken legal action against states seeking to regulate event contracts under their gambling laws.

In June, the CFTC proposed restrictions on certain contracts involving war or assassination and some sports proposition bets considered particularly susceptible to manipulation.

Earlier this month, nine Democratic senators urged Selig to prohibit wildfire event contracts, warning they could create incentives for arson, insider trading, and disaster profiteering.

Kalshi has faced legal setbacks in several states. Last week, a Washington judge ordered the company to stop offering contracts on sports, elections, politics, and other events in the state, finding it likely violated state gambling and consumer protection laws. Two days earlier, the CFTC ordered Kalshi to keep trading amid a separate dispute over New York's attempt to block its contracts.